The seven repetitive increases in interest rates by the Bank of Canada have forced many Quebecers to increase their mortgage payments to keep their property. While 60% of mortgage loans will have to be renewed within three years, it is disturbing to note that non-payment notices are up 34% compared to last year, according to the most recent Terram report on the real estate market in Quebec.
The notice is issued by a creditor following non-payment of mortgage. The notice informs the homeowner that the lender could foreclose on the property after a certain period of time if the situation is not resolved.
The newspaper noted during testimony that several owners will soon find themselves in financial difficulty. They are preparing for a shock and will have to look for solutions to make ends meet:
- A father who was six months early to renew his mortgage is forced to pay $200 more per week due to rate increases.
- A couple owning a house, whose mortgage is not completely paid, will have to renew in 2025 at a much higher rate than the 2% interest rate signed in 2020.
- A young couple who needed four jobs to raise an additional $3,500 a few days before the notarial deed.
Postponing the inevitable
The Terram report, which specializes in the collection and analysis of real estate data in Quebec, also shows that the volume of mortgages continues to increase in the province (by 10% over the past month), which suggests that a trend is emerging where people who renew their mortgage increase the amortization period to keep their monthly payment at the same level.
“People refinance because they are in debt, and it’s a way for them to keep their monthly payments low,” explains Stéphane Bruyère, mortgage broker at Mortgage Architects.
For example, someone who has 15 years left to pay their mortgage can refinance to 20 years, which will lower their monthly payment.
The Quebec Land Registry, which produces statistics to identify major real estate trends, also shows that the “financial difficulty index” is up 34.6% compared to last month, in particular due to exercise notices. which increased by 47.2%, for a total of 471 notices recorded in January.
This index brings together certain acts which indicate difficulty for an owner to meet their financial obligations, such as default on a mortgage.
A warning
In October, Paul Beaudry, former deputy governor of the Bank of Canada, threw a wrench into the water by emphasizing the danger of future mortgage renewals for the economy.
“The danger facing the economy is that many people took out five-year mortgages in the time of COVID, at rates as low as 1.5%. When they have to renew, their mortgage payments will jump, since current rates are more around 6.7%. If long-term interest rates remain at the current level, everyone will be hit,” he warned.